Scottish Professional Football League officials want at least two Irish League sides, and two from Wales, to participate in a new look competition as early as next summer.
Uefa are being briefed about the proposals today which incorporate an expanded competition featuring Irish League and Welsh teams along with clubs from the Scottish Championship, Scottish League One and Scottish League Two as well as Under-20 sides from the Scottish Premier League.
The SPFL had hoped English Premier League clubs would allow their youth sides to participate but they are likely to enter the Johnstone's Paint Trophy in England.
Petrofac Training's sponsorship of the knockout competition ends after this year's final between Rangers and Peterhead at Hampden on April 10.
At the moment, BBC Alba pay around £100,000 a year to televise the Challenge Cup tournament but SPFL chiefs hope to raise similar sums from Welsh broadcasters and BBC Northern Ireland.
Dwindling prize money and problems over fixture scheduling contributed to the Setanta Cup's downfall and clubs will be wary of similar issues threatening to derail this proposal but for now they are giving the initiative serious consideration.
Glenavon and NIFL chairman Adrian Teer said: "We're excited at the prospect of joining up in a new competition. It's a concept that is very interesting to us."
Linfield chairman Jim Kerr questioned whether Danske Bank Premiership clubs who secure European qualification would be able to feature in the revamped tournament.
"It's a particularly good idea as it widens the opportunity for clubs in Northern Ireland but from my understanding, the clubs from the Irish League who qualify for Europe will not be eligible to take part," suggested Kerr.
"The other clubs will then vie to take part perhaps with a preference given to our League Cup winners if they haven't already qualified for Uefa competition.
"It's an opportunity for our clubs to explore new horizons."